Flexibility in Framework for Voluntary Delisting

Voluntary delisting refers to the process through which a listed company seeks to remove its equity shares from a recognized stock exchange, subject to regulatory safeguards that ensure fair treatment of its public shareholders. Since delisting deprives investors of future trading opportunities on the stock exchange, the regulatory framework has been progressively strengthened to ensure transparency, fair price discovery and an equitable exit mechanism. Beginning with administrative guidelines in 1998, the framework has evolved through expert committee recommendations, consultation papers, Board deliberations and regulatory amendments into a comprehensive principles-based regime under the SEBI (Delisting of Equity Shares) regulations.

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The Securities and Exchange Board of India (SEBI) has framed rules to register and regulate stock dealers, share shoppes, and unauthorised stock exchanges under Section 12 of the SEBI Act. These rules are proposed with a view to redressing the grievances of investors in semi-urban and rural areas who have been experiencing difficulties in getting services for disposal of securities or consolidating odd lots. The regulations impose a statutory duty on stock dealers to deal only on a spot delivery basis and issue receipts in a specified form. Additionally, every applicant eligible for grant of a certificate must pay an initial fee of Rs 50,000 to keep the certificate in force. Stock dealers will have to submit information relating to their activities as and when required by SEBI.

Development finance institutions have played a constructive role in establishing India's industrial base. However, these institutions seem to have moved away from their developmental role and are getting entangled deeper in management and control of private sector industries. Corporate circles have been pleading for a re-examination of the role and appointment of nominee directors to avoid day-to-day interference in company operations. Furthermore, some argue that financial institutions should keep their funds rolling by disposing of shares with a ready market. The concept of growth or mutual funds has yet to take root in the country, but such funds could prove successful in mobilising and canalising community savings for industrial development.